South Africa making more progress to get off FATF grey list

South Africa has made more progress in getting off the Financial Action Task Force (FATF) grey list, with the country obtaining nine upgrades on its action plan of 22 items. However, it will not be able to exit the grey list this year or early next year as planned.

The areas of strategic deficiency include a sustained increase in anti-money laundering and/or counter-terrorist financing investigations, improved risk-based supervision of designated non-financial businesses and professions and accurate and up-to-date beneficial ownership information on legal persons.

The FATF is an intergovernmental body established in 1989 by the ministers of its member jurisdictions to protect financial systems and the broader economy from threats of money laundering and the financing of terrorism and proliferation, thereby strengthening financial sector integrity and contributing to safety and security. 

Jurisdictions under increased monitoring, such as South Africa, actively work with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing.

When the FATF places a jurisdiction under increased monitoring, it means the country is committed to resolving the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. This list is often externally referred to as the “grey list”.

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FATF: 8 areas of concern largely addressed, one partly addressed

After meeting in Paris last week, the FATF Plenary announced the nine upgrades for South Africa, including eight to “largely addressed” and one to “partly addressed”. South Africa is now deemed to largely or fully address 16 of the 22 action items in its Action Plan, leaving the country with six outstanding action items that must be addressed for the last scheduled reporting cycle concluding in February 2025.

The FATF said South Africa has taken steps towards improving its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime, including:

• demonstrating a sustained increase in outbound mutual legal assistance requests
• strengthening its AML/CFT supervisory capacity by improving the risk-based supervision of Designated Non-Financial Businesses and Professions (DNFBPs)
• enhancing its identification, seizure and confiscation of proceeds and instrumentalities of a wider range of predicate crimes in line with its risk profile
• updating and implementing its terrorist financing strategy and increasing relevant authorities’ terrorist financing capabilities on the basis of an understanding of its terrorist financing risks and
• ensuring the effective implementation of targeted financial sanctions.

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FATF says SA must still address remaining strategic deficiencies

According to the FATF, South Africa should continue to implement its action plan to address its remaining strategic deficiencies, including:

• demonstrating that all AML/CFT supervisors apply effective, proportionate and effective sanctions for non-compliance
• ensuring that competent authorities have timely access to accurate and up-to-date beneficial ownership information on legal persons and arrangements and applying sanctions for breaches
• demonstrating a sustained increase in investigations and prosecutions of serious and complex money laundering and the full range of terrorist financing activities in line with its risk profile.

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Treasury pleased with SA’s FATF progress

National Treasury says in a statement it is pleased with South Africa’s progress. “South Africa is now left with one reporting cycle to address the remaining six action items. Three of these relate to demonstrating a sustained increase in the investigation and prosecution of complex money laundering, terror financing and unlicensed cross-border money or value transfer services).

“The remaining three relate to the timely access of beneficial ownership information regarding companies and trusts and the imposition of remedial action and dissuasive sanctions by designated AML/CFT supervisors.”

However, Treasury reiterated its previous communication in July that it remains a challenge to exit the grey list at the conclusion of the next cycle, as South Africa will need to address all six outstanding action items by February 2025 to do so.

If South Africa is successful in addressing all remaining action items in the next reporting cycle, the February 2025 FATF Plenary will authorise an onsite visit by the FATF Africa Joint Group to confirm its assessment on the progress of all action items around May 2025.

Treasury says if the onsite assessment results in a positive outcome, the FATF Africa Joint Group will recommend to the June 2025 FATF Plenary that South Africa be removed from the grey list. However, if the FATF Africa Joint Group assesses that South Africa has not adequately addressed all remaining action items in February 2025, South Africa will be required to continue reporting back to the FATF Africa Joint Group every four months until all the action items have been addressed.

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Exiting FATF grey list moved to October 2025

Therefore, Treasury says, the exit from greylisting will be moved from June 2025 to October 2025, or later. Treasury chairs the interdepartmental committee co-ordinating the process to exit greylisting and has been reporting regularly to cabinet, and the Justice, Crime Prevention and Security (JCPS) cluster.

The committee provided effective leadership and co-ordination to ensure the upgrading of action items related to outbound mutual legal assistance requests, seizure and confiscation of proceeds of crime, implementation of terror financing strategy and ensuring the effective implementation of targeted financial sanctions, Treasury says.

It continues to oversee further progress in at least four of the six outstanding action items, including three related to investigations and prosecutions.

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Treasury: beneficial ownership remains a problem

Treasury says the committee also notes that the action item related to beneficial ownership registries is out of date as it was due in September 2024, as the coverage for both companies and trusts was assessed to be too low by the FATF Africa Joint Group in September 2024.

Therefore, Treasury says, all companies and trusts must ensure they have registered accurate beneficial ownership information with the CIPC and Masters Office according to their legal obligations.

Treasury calls on all companies and professional trustee service providers to ensure registration by companies and trusts they engage or are involved with before 30 November 2024, to significantly increase the coverage in beneficial ownership registries.

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